Our NEC3 expert Steven Evans looks into a subject that’s been well discussed by many NEC3 users, whats the difference between a compensation event notice and an early warning notice? Here Steve gives his experienced thoughts on the matter.
An early warning notice is a notice in respect of any event or risk which may happen, will happen or has happened and which could:
- Increase the total of the Prices
- Delay Completion
- Delay meeting a Key Date
- Impair the performance of the works in use or
- Increase the Contractor’s total cost.
For the first four items, notification is mandatory (with sanctions if notification is not made) by either the Project Manager or the Contractor. The final item is optional and notification can only be made by the Contractor.
Once notified, the event is added to the Risk Register and can be discussed in a Risk Reduction Meeting or any other forum with the end objective to avoid or reduce the risk.
An event/risk identified in an early warning notice, or the action taken to avoid or reduce the risk, may be a compensation event.
A compensation event notice is a notice in respect of an event which will happen or has happened and is one of the events listed at clause 60.1.
Notification is mandatory (with sanctions if notification is not made) by either the Project Manager or the Contractor. The Project Manager is only able to notify those compensation events which arise from the Project Manager or the Supervisor giving an instruction, issuing a certificate, changing an earlier decision or correcting an assumption and should notify those in the first instance.
The Contractor can notify any compensation event including those that should have been notified by the Project Manager but were not. If the Contractor does not notify an event which is not one that the Project Manager can notify within 8 weeks of becoming aware of it, then he loses his right to a change in the Prices, the Completion Date and/or the Key Dates.
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